Interview: ‘Post recession, it’s all about expansion’

Jo Francis
Monday, November 25, 2013

With more than 30 years in the printing industry under her belt, Fastsigns chief executive Catherine Monson is steeped in both print and the franchise model. She took over at Fastsigns five years ago, when founder co-founder Gary Salomon retired, which meant that she arrived in the midst of the global financial crisis. But with the worst behind us her focus now is on growing the $325m (£200m), 545-centre Fastsigns network.

PrintWeek caught up with the constantly-on-the-road Monson when she was in the UK for the two-day Fastsigns UK franchisee conference. And, unlike her appearance on TV’s Undercover Boss, she didn’t need to don a disguise for this visit. 

Jo Francis What happens at the conference?

Catherine Monson All but two of our 19 UK locations will be there, so it’s a great opportunity to get together and talk about technology, business trends, sales building and plans and implementing our branding fully. I’ll be doing one of the keynote presentations and we also have some outside speakers. I’ve done something similar in the US at 14 different locations this year, it’s all about the messaging that we think is important to drive our brand forward.

Wow, that’s some road trip. Obviously in the States you have hundreds of centres.

Yes, we have 480 locations in the US alone. We have 545 locations in eight countries in total, and we’re very aggressively expanding in other countries; we opened our first location in Saudi Arabia last year and the second one will open early next year. We’ve also just signed letters of intent to open stores in the UAE and North Africa. So the company is poised for growth in countries we’re already active in, but also in new countries.

Are you looking to expand in European countries other than  the UK?

Today we’re just in the UK, but keep in mind that I’ve only been with the company for less than five years. And my first few years were rather absorbed in helping our franchisees navigate and get through the recession. So growth and expansion was put on hold for a while. Now though, it’s all about expansion. For example, we’re talking to a group in Russia that has 80 locations of a different franchise in a related business and we might strike a deal where they can offer Fastsigns franchises to the those 80 locations.

So they would add a Fastsigns licence to an existing franchise?

Exactly. We would call that a co-brand. And we are also looking at other countries that already have sign franchises, but want to convert to Fastsigns.

The co-branding, is that like a bolt-on franchise then? Where a company might be, say, a commercial printer looking to add signage or wide-format work?

Yes, we launched a co-brand programme last October in the US and we’ve already sold 12 – and nine are already open. So we’re really excited that this has taken off so quickly. It’s also interesting because, while it’s not surprising that they’re witnessing rapid growth in the wide-format business, as a result of the co-branding, they’re also seeing incremental growth in their sheetfed commercial business, because people that come to them for Fastsigns are also looking to place other work. We thought we would see synergistic benefit, but didn’t know for sure. Now we know.

Is there an ideal company that makes a co-brand?

We’ve sold two franchises to photographic labs. We’ve sold one to an apparel company that embroiders and silk-screens clothing and the rest have all been commercial print companies. We do have standards though, for example in the US, co-brands must have at least $1m in sales before they can add a Fastsigns franchise. The average has been $3m-$4m, so these are not dying companies taking one last throw of the dice, these are vibrant companies looking to intelligently diversify.

Do you have any in the UK?

Not yet, but I’m meeting with someone tomorrow who we hope will open the first early next year. 

We look forward to hearing more in due course. What makes a successful franchisee?

Someone who has a level of management experience and, ideally, some marketing or sales experience. A desire to work for yourself, of course. Then beyond that, someone who wants to follow the Fastsigns system. We have specific management systems for financial reporting, sales and marketing, production and employee management and these are all proven formulas. What will make you successful is to be focused on business development, being active in the community, networking and calling on prospects at their place of business. I’m not saying that these are the secrets of success, but it’s our recipe for success that franchisees make their own.

So, being a brand champion then?

Exactly. That’s actually a term I use. That’s what it takes to be successful.

What about your existing franchises though? How are you helping them to grow?

We’re very focused on growing same centre sales in each of our locations, with very specific strategies and tactics to achieve that.

What sort of things?

The first is what we would call our ‘more than brand’ positioning. We’ve positioned Fastsigns as being more than fast and more than signs. We know that customers need more than just basic signage, they need trade show exhibits, vehicle wraps and things that we might consider signage, but they might not use that term. And those same customers are probably responsible for buying other marketing materials.

So they might not do it all themselves, but they can manage it.

Precisely. The more we can handle for them the more project management, the more headaches we can take away the better we’re going to serve the customer by taking the monkey off their back and putting it on ours. The first strategy to increase turnover at a location is to implement that ‘more than’ positioning and widen the products and services offering. The second strategy, which has been very successful in the US and Canada and we expect to have similar results here, is an outside sales initiative.

I read something about that; can you explain a bit more about it?

We’re very focused on teaching our franchise partners how to hire, train, manage and motivate an outside sales person to ensure that person achieves enough business, and then hire a second and then a third. If you look at our most successful US sites, they all have outside sales people. So we think that model works. Yes, there is a percentage of business that will walk through your door or will find you because of a Google search, but that buyer is very often price motivated, because when they found you online they also found five others. Whereas with outside sales, you’re asking open-ended questions and really trying to understand that prospective customer’s business challenges. So price is no longer the only criteria for the purchasing decision.

So would most of your centres have outside sales at the moment then?

It’s a minority. When I joined the organisation in 2009, throughout the entire network we had 10 outside sales people. Now were up to around 230. Yes, that’s huge growth since we launched in 2010, but its still a minority and we know it’s the recipe for success and that we need to move it forward. So much so that this summer we launched an outside sales hiring initiative, where we will actually pay our franchise partners a significant amount of money if they hire an outside person, train them and keep them on for a year.

Outside of these two initiatives, what do you think are the key opportunities for your franchisees?

One of the areas that we think is important for all of our franchisees to get into is digital signage. Digital screens, media players and actually being able to supply and update content for customers.

But that must be different to a whole order of magnitude to what they are used to?

Yes, the real challenge is to wrap your mind around constantly changing content. We’ve been putting a great deal of time into training our folks on the value proposition of digital signage and how to sell and then, most importantly, how to create it and when to refresh it. If you think about the value proposition of digital signage, then in a shopping centre in the US, the morning, afternoon and evening crowds are different. So digital signage represents an opportunity to target messaging at demographics. It’s also relevant to small business: restaurants, say, that want to trial new menu items or promote outside catering.

Do you have specific partners for digital signage?

We have several partners, but we believe that the technology is changing so rapidly that there’s no real benefit to tying yourself to one supplier. So we have a handful of suppliers that we have good strategic relationships with.

Do you think that digital signs can become a big part of the franchisees’ business then?

Well, there are certain studies, conducted by the Digital Signage Federation in the US, that think that at some point in the future 30% of all signage could be digital. Now, I don’t know if that’s right or wrong, but if it turns out to be even 15% then that’s still a big opportunity. But either way, what we believe is that a company that provides the digital signage is well placed to supply the static signage. So our concern is that if our franchisees don’t embrace digital signage and a competitor does, then they will not only lose the digital signage work, but also the static. So it’s a bigger play than just digital.

Things are clearly changing in your market.

Absolutely. And the print industry knows all about change. I’ve been involved in the print industry for 33 years. In that time the sheetfed industry and the web-fed industry have seen massive consolidation in the US. There are 50% fewer printing companies in the US today than there were 15 years ago and it’s probably similar here in the UK. Part of that has been driven by the internet, but also because much of the work that you used to place in print for pay, you can now print in you own office, so billions of pages have been taken out of the market. What I love about the Fastsigns model is that I don’t see those kinds of displacement technologies playing a role. Especially if we’re embracing and selling digital signage.

What about web-to-print? Is that an area that’s of interest to you?

There’s less need for web-to-print in large-format graphics. We do have an e-commerce solution, but it’s typically primarily private catalogues for specific customers, for repeat orders or standard products. We are working on our Signonline product now, which is in beta, but my gut feeling is that it’s never going to be as big as web-to-print in commercial print.

It has not been all rosy here in the UK, though. You have lost a few franchisees. 

We have. The 2008/2009 recession was very tough and we lost some in the US too and that’s heart-breaking. In some cases we can help the owner turn the business around or sell. But in the minority of times the business fails. I read that here in the UK, it was announced that you’re predicting 2% growth. A few years ago we would have thought 2% growth is wretched, but today that’s a heck of lot better than it has been and that will only help our UK franchisees.

Actually, before coming here I was talking to some of your UK franchisees and one of the criticisms was that there hasn’t been any new franchisees here in three years, is that correct?

That’s right. But not many have been saying in the past three years ‘this is the time I should go into business for myself’. But that is changing. We’re probably going to get this co-brand on board and we’re talking to another potential franchisee that is looking at a production facility with multiple storefronts. But you’re right; we didn’t sell in the UK in 2009 either. People aren’t willing to strike out when things are scary.

That makes sense. Other criticisms were centred on the projected profits compared to the actual profits a franchise can generate, and some questioned whether Fastsigns could have done more to help franchisees during the downturn.

I know that we don’t make financial performance claims that can’t be backed up by benchmark surveys, but I’m always open to feedback. In the network overall though [those projections are achieved], absolutely. If you think about it, if you’re not profitable you can’t afford to pay us royalties. Our only revenue stream is royalties really, so if our folks aren’t profitable there’s no chance of us getting 20 years of royalties. It’s a very interdependent relationship.

But the royalty fee is based on turnover, not profit?

That’s right. But if you’re not making a profit, you can’t pay. The reason that we don’t charge royalties on profits is that we have less control over profits. If they’re a poor manager, are over-staffed, aren’t motivating their people, or their cost management or production controls are poor, then that will eat into the profit. That’s why every franchisor I know of charges on turnover. But we have things like the sliding scale royalty rebate, which reduces the royalty fee once your sales get beyond a certain point. We also work very hard to make sure they’re profitable. 

How so?

We have Garth Allison as our country manager, who previously ran a Fastsigns franchise in Sheffield, but passed that on to his son when we offered him the role. Then we have David Callister as a business adviser who has been with us for five years. Between Garth and David franchisees benefit from exceptional advice on how to be profitable and grow their sales volume. They also have the tools and resources developed by our headquarters in Dallas. After my first year on the job, I set some key objectives, the first was to increase our franchisees average profitability by 50% by 2015. We’ve made good progress in the area and I think we’ll achieve that. The second objective was to increase each centre’s sales to $1m. In the US our average centre turnover is $700,000, in the UK the goal is £450,000 from the average of around £330,000 now. And we want to do that by the ways we’ve already talked about.

What were your other key objectives?

To increase the value of the Fastsigns brand through good marketing and more locations.

How do the locations work?

We work on protected territories. So we promise not to set up another franchise in your area. It works on business counts, so a protected area will consist of 4,500 businesses minimum in the US, typically nearer 6,000 here in the UK.

I appreciate it’s a different proposition with Fastsigns, but here in the UK the high-street print franchise has been decimated.

I think it’s the same in the US, but it’s the same as consolidation in the commercial print arena, driven by declining volumes. But when I look at Fastsigns, as I mentioned earlier, we’re not exposed to same kinds of displacing technologies. Also, we look for visible locations, but not necessarily on the high street. 

Where is the best location?

On a business park, at the very front of it, on a highly travelled street. So it’s not retail. Sometimes you’re lucky and you find the perfect location. But you don’t want to be hidden at the back in the middle of a business park, because we believe that while we have the brand, people need to see the brand. It may become less important as we add more outside sales people though.

What’s the best equipment set-up for start-ups and how much work do they outsource?

A high-quality Epson wide-format printer would be the workhorse; you would have a laminator, a Mimaki plotter for cut vinyl and then, over time, you would add more equipment – perhaps a flatbed press, a router or flatbed cutter. In the UK, because of real estate costs being higher than in the US and the restrictions this places on space, the average amount of brokered [outsourced] work is slightly higher, maybe 28%, compared to 15%-16% in the US. But then if we talk about the franchise in Leeds, that has 370m2 – so he has all the technology and his outsourced work will be correspondingly lower.

Who is your main competition, is it another franchise or just local competitors?

It could be either; it just depends on the location. But if you’re talking about our biggest competitor to selling a franchise, our biggest competitor here [in the UK] is Signs Express.

You’ve been in the business for five years now, and I think we can say that’s been a challenging five years, what’s the plan for the next five?

Growth for every location, and growth though new locations in existing countries and new countries.

In the Undercover Boss programme you confessed to being a workaholic. What’s your typical day like?

I’m yet to find that out myself. I travel about 50% of the time, because I believe its very important for me to be in the field talking to franchise partners and asking what they’re challenges are and how we can improve our support. So I suppose my typical location is a hotel room, rather than my home. I do my paperwork and emails at night so yes, I can best be described as a workaholic.

What is your personal key to success?

Goal-directed behaviour is one of the biggest differentials between people who are successful and those who are not. 

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